The NFT market has exploded in popularity recently. Overall, it has revolutionized how people share and collect digital art. Digital artists are currently using NFTs as a way to monetize their art and connect with their community more efficiently. While NFTs are mainly used for digital art, these can be used to represent ownership of any digital asset.
NFTs took the world by surprise, and even now, not many people understand how they work or how they can make money with NFT art. Thankfully, there are dozens of sources where you can learn everything about how NFTs work, and we compiled them all in this article.
If you want to learn more about NFTs, where you can find them, and how you can make money with them as a digital artist, keep reading this article!
What Is an NFT?
NFT stands for “non-fungible token.” When an asset is “non-fungible,” it means that it cannot be traded for other similar items. In essence, when you have a non-fungible token, you’re holding a one-of-a-kind item. An NFT can be used to represent ownership of a wide variety of items online, and they can also be bought and sold indefinitely.
Once someone tokenizes an asset, it’s automatically secured on Ethereum blockchain technology, meaning no other person can alter the NFT’s records. In other words, the current NFT owner is unique.
On the other hand, when you have fungible tokens, you can easily trade them with an asset of similar properties; this is the case with money. If you have a $20 bill, you can change it for two $10 bills and keep the same value.
What Is the Difference Between an NFT and a Regular Internet File?
There’s an ongoing debate on whether it’s worth purchasing an NFT or not. Considering NFTs are only used to represent ownership of digital artwork or others, many people have asked themselves: “Can’t I just copy/download the file?”
The short answer is: Yes, you can. There’s nothing stopping anyone from downloading a digital file and keeping it on their computer. One of the most popular cases with NFTs happened with the artist “Beeple.” In March 2021, Beeple sold a print for $69 million; this made Beeple one of the artists with the highest-value NFTs in the world today. The digital piece that was sold was called: “Everydays – The First 5000 Days.”
Despite the NFT being valued at several millions of dollars, that didn’t stop people from copying and sharing the NFT art hundreds of times. In that case, what’s the point?
Keep in mind that while NFTs can essentially be copied hundreds of times, these users don’t hold any copyright ownership for that piece of work. Many people compare NFT tokens to autographed prints; some people may have the same print, but it’s the autograph that makes it one of a kind.
In other cases, new NFT owners can use the NFT marketplaces to continue selling the NFT, giving the original owner a percentage of profit. Overall, NFT tokens may be used to have proof of ownership stored in the public record and to place assets like art in a safe online environment, such as the Ethereum blockchain. On the other hand, regular internet assets are stored on regular servers and don’t offer any proof of ownership you can verify online.
What Are NFTs Used For?
Now that you know NFT stands for “non-fungible token,” it’s time to learn more about how it works within the Ethereum blockchain. As mentioned before, an NFT token is used to assign ownership of digital assets, which can be any of the following:
- Legal Documents
Overall, people could mint any asset into an NFT, all it takes is to be creative with it. Most users use NFTs for minting an image, video, game, artwork, and other items of value. It’s important to note that NFTs may only have a single owner at a time on the marketplace. The ownership is assigned through unique IDs and metadata on the Ethereum cryptocurrency blockchain, which no other asset can replicate.
Minting an NFT involves using smart contracts to assign the transferability and ownership properties of the artwork. In essence, the process involves the following steps:
- Creating a new block into the Ethereum cryptocurrency blockchain.
- Validating the smart contract information.
- Recording the ownership information into the cryptocurrency blockchain.
Finally, a minted NFT token gives the owner a unique identifier linked to an Ethereum address. One of the most remarkable parts of NFTs is that creators and collectors can easily verify the information in any marketplace. It’s important to note that NFTs mostly exist in Ethereum and may only be transferred through an Ethereum-based marketplace.
How Do Royalties Work with NFTs?
An interesting thing about NFTs is that the creator can earn royalties as soon as the NFT is sold to someone else. Depending on the marketplace the creators work with, they may earn different royalty percentages for their artwork; for example, the owners of EulerBeats Originals are earning approximately 8% in royalties every time their NFT token is sold.
Most NFT and crypto markets support creators through considerable royalty percentages. However, other sites are not as friendly for creators. In essence, you must look for the right platforms if you want to earn something for your NFT sales in the future.
Thankfully, the royalty payment process is entirely automatic on most sites. In these cases, the creator is going to earn money each time they sell the NFT. In case your NFT already has a royalty program in it, all you have to do is wait until you sell it to someone else.
How Does Asset Scarcity Work with NFTs?
In most cases, the artists decide how scarce their digital assets (or assets in general) are going to be for the world; for example, there may come a time in which you want to sell tickets for an event as NFTs. There, you can decide how many replicas of the same NFT you’re going to sell on the market. Regardless of the option the artists choose, each NFT is still going to have a unique identifier with a single owner.
While most artists use NFTs to create a one-of-a-kind token to increase its value, they may also use them to create a limited amount of the same asset.
How Can You Make Money with a Non-Fungible Token (NFT)?
As stated before, NFTs can be bought and sold as the artists/collectors consider appropriate. However, some artists still haven’t figured out how they can sell their art on the internet and make a profit from it. While the process may seem a bit complicated, it’s not as hard to start making sales with their artwork; all it takes is choosing the right platforms to work with and set up an Ethereum wallet.
Before the NFT world started to increase in popularity, most digital artists used social media to create a community, seek exposure, and sell their art on the blockchain. However, one downside to this method is that the artist typically would have to pay the social media platforms money to gain exposure, which didn’t ensure that the art piece was going to get sold.
In the case of NFTs, the funds go directly into the owner’s crypto wallet once the tokens are sold. Additionally, if the new owner sells the digital asset to someone else, the original proprietary could earn royalties automatically, making the process even more convenient for everyone. Once the artist receives their money, they can go into their crypto wallet and exchange the Ethereum tokens for cryptos like Bitcoin or other assets.
The Main Problem with NFTs on the Market
Considering the high value most NFTs have (remember that some of these assets are being sold for millions of dollars right now), some people are still skeptical about them. The main argument from these people is “I can just screenshot that picture and have it for free.” As mentioned before, anyone could simply go into the internet, look for a picture of the Mona Lisa, and download it. However, that doesn’t make you the proprietary of the original piece.
This is why several people who own old memes or interesting items of value sell their digital assets for such high price points; for example, Chris Torres, proprietary of the Nyan Cat meme, sold the original animation for 300.00 ETH, which was equal to $590,000 at the time. Now, millions of people could download the Nyan Cat animation right now, but the person who bought it is still going to be the person who paid the 300.00 ETH to Chris.
Some other people perceive NFTs as mainly bragging rights. While that doesn’t matter for some people, many art collectors value having the power to say that the collectibles they have are of their property in some form. Remember that having the real thing (and being able to verify it easily) opens a big door of possibilities for digital creators and artists.
How NFTs Are Also Being Sold in Gaming
While most NFTs are being sold as digital art, including video, image, or music, many game developers have gained interest in selling NFTs for the video game market. In essence, an NFT could be used to provide proof of ownership for in-game items, making a particular in-game economy much more popular in the future.
In the case of players, if they bought an in-game NFT, they could sell it again in an open marketplace once they don’t want it anymore. Once they complete that process, they could start profiting off from these game collectibles. On the other hand, game developers can create in-game items as an NFT and earn royalties each time those items get sold.
The most remarkable thing about selling video game NFTs is that these items are still going to be yours even if the game loses support in the future; in fact, digital memorabilia may still have some form of value for collectors. Overall, these marketplaces are also excellent places where NFTs can be bought and sold.
Can You Also Sell Physical Items As NFTs?
Theoretically speaking, yes. Tokenizing physical items themselves are still a work in progress considering most sales of NFTs come from digital art. However, some projects are exploring the possibility of tokenizing real estate, one-of-a-kind items, and others.
While it’s currently challenging to tokenize the physical object itself, you can tokenize the deed; for example, you may purchase a car with Ethereum and receive the deed in the form of an NFT. Tokenizing physical items might translate into more fluent transactions in the future, so it doesn’t sound too far-fetched.
Where Can You Buy or Sell NFTs?
If you’re a collector who wants to go and purchase digital art right away, there are some things you must keep in check first. Keep in mind you need a crypto wallet to make a purchase on any NFT marketplace. Most of these marketplaces only allow purchases through ETH or another native crypto, so if you have another cryptocurrency in your wallet, such as Bitcoin, you may have to exchange it through a couple of transactions. Some websites, such as Coinbase or eToro, may allow you to do these transactions without any problems.
Next, you must look for a secure website where people are actively selling and buying NFTs. Some of the most popular websites include Foundation and OpenSea.io. Make sure to research the artist before making any sales; many impersonators have tried to list other artists’ work without permission and profit from them. While these websites have strict verification processes, you never know.
On the other hand, if you’re someone who’s looking to sell any art form digitally, all you have to do is to look for the right website to mint your art. There, you’re going to go over a simple process where your image/video/music is going to get minted into an NFT and listed in the marketplace. Once someone bids on your art piece, you may start making the appropriate transactions or wait for higher bids.
Should You Buy or Sell NFTs?
It mostly depends on you. If you’re a buyer, keep in mind many NFTs are extremely expensive, with some of them surpassing the million-dollar barrier. It’s important to note that (as with Bitcoin or other cryptos) the future for NFTs is uncertain. You never know what’s going to happen with this new form of art collecting.
If you have money to spare and want to become the proud proprietary of a digital piece, you’re free to do it. We recommend that you start with low investments, though.
Remember that the art piece’s current demand is the main factor affecting its price. The more people want the item, the more valuable it’s going to be. In the case that no one wants the digital item in the future, it may become harder to re-sell it.
As for the sellers, NFTs have proven to be an excellent method to gain exposure on the internet and make good money from digital pieces. However, since this is still a growing market, you’re going to be exposed to the same risks as buyers.
In either case, the best thing you can do is to do your research and be careful with the transactions you make (especially if you’re making million-dollar transactions!).
What Is NFT’s Environmental Impact?
Since NFTs work with blockchain technology and cryptocurrencies in general, many people are worried about the energy impact they can have on the environment. Currently, Ethereum is estimated to consume at least 44.94 terawatt-hours of energy, which is close to the number of energy countries like Hungary consume per year.
Considering that some cryptocurrencies can cause as much energy consumption as an entire country, some people have considered backing off from cryptos and blockchain networks to protect the environment. However, NFTs, in general, aren’t directly responsible for increasing Ethereum’s blockchain’s carbon footprint.
While Ethereum currently consumes a considerable amount of energy, the team has been working on a solution to provide the same blockchain benefits for people without consuming that much energy. One of the most recent upgrades coming for ETH is ETH2, which is planning to replace mining with staking.
If ETH2 starts using staking for the blockchain network, it might use much less computing power, reducing the carbon footprint by a significant degree. It’s important to note that this is still a work in progress, so the debate of NFTs’ environmental impact is still standing, and it’s not likely to go away until the Ethereum team finds a solution.
Examples of High-Valued NFTs
We’ve talked about digital tokens being sold as high-valued NFTs, and some of them even surpassing the “million” dollar mark. The NFT market is still growing to this day, but there have already been some interesting transactions that were covered on international news, such as Beeple’s “Everydays” digital piece.
If you want to learn more about these high-valued NFTs, keep reading!
- CryptoPunk #3100: CryptoPunk #3100 is currently the most expensive one on the market. This digital piece features an Alien Punk avatar with a blue/white headband and a blue skin tone. The NFT was sold in March 2021 for 4,200 ETH or $7.58 million.
- CryptoPunk #7804: Similar to the #3100 model, the CryptoPunk #78’4 features a pair of shades, a front-facing black cap, and a smoking pipe. This avatar, in particular, was also sold in March 2021 for $7.57 million, which was very close to the #3100 CryptoPunk model.
- Crossroads: This is another art piece created by Beeple. The art shows a big baby that resembles Donald Trump, and it’s filled with graffiti. The NFT got sold through Nifty Gateway for $6.6 million.
- Doge: Doge has always been one of the most popular memes in history. In this case, the picture of the “Doge” meme got sold for 1696.9 ETH or $4 million, which may seem absurd for some people since it’s a meme.
- The First-Ever Tweet: Jack Dorsey (Twitter’s founder) was the first person to make a tweet on the platform. The tweet read “just setting up my twttr,” and it got posted on March 22, 2006. This year, Jack sold the tweet to Sina Estav, current CEO of Bridge Oracle, for the insane amount of $2.9 million. On a good side note, the $2.9 million were given to charity.
- “The Best I Could Do”: Rick & Morty’s co-creator, Justin Roiland, made a doodle based on The Simpsons and labeled it “The Best I Could Do.” This doodle got purchased for $1.65 million. Most people believe that the reason for the high bid was due to Roiland’s influence on current TV culture.
- Auction Winner Picks the Name: This one is an interesting case. Here, artists 3LAU and SlimeSunday made a song and music video and posted them as NFTs. According to the artists, the person who bought the NFT had the right to choose the name for the song (hence the NFTs name). Finally, the NFT got purchased for $1.33 million.
- Forever Rose: This NFT features a digital capture of a rose taken by Kevin Abosch. Abosch is one of the most popular crypto artists to date, and he has sold multiple pieces for millions of dollars. In the case of the “Forever Rose,” it got purchased for a million dollars.
What’s Next for NFTs?
NFTs have had significant growth over the past few years, but there’s still much ground to cover, starting with Ethereum’s environmental impact. However, we believe NFTs are an excellent option for digital artists to consider since they provide a much more secure and profitable platform to earn money from their art pieces.
While the coming times of the NFT are uncertain, today is an excellent opportunity to start learning about it; even if people forget about it eventually, it may not be a bad idea to try them out, especially if you’re an artist or a collector.
Many people believe that the digital world is going to take over most traditional channels eventually, including art markets. While physical museums or marketplaces are not expected to close anytime soon, NFT markets have taken a significant step toward a more “digital” way of life, at least regarding art collecting.